If I own a foreign corporation, am I automatically subject to GILTI or NCTI?
No. For your 2025 return, GILTI (Global Intangible Low-Taxed Income) applies only if you are a U.S. shareholder of a controlled foreign corporation (CFC), meaning you own at least 10% of the vote or value of a foreign corporation that is more than 50% owned by U.S. shareholders. If your ownership falls below 10% or the entity is not a CFC, neither GILTI nor its 2026 replacement applies.
Two tests must both be met:
| Test | Threshold | Who satisfies |
|---|---|---|
| U.S. shareholder | 10%+ vote or value | You personally |
| Controlled foreign corporation | U.S. persons own >50% | Aggregate U.S. shareholders |
What changed in 2026: GILTI becomes NCTI
The One Big Beautiful Bill Act (signed July 4, 2025) replaced GILTI with Net CFC Tested Income (NCTI), effective for tax years beginning after December 31, 2025. The ownership thresholds above remain unchanged, but the calculation is significantly different:
| GILTI (your 2025 return) | NCTI (2026+ returns) | |
|---|---|---|
| QBAI deduction | 10% return on tangible assets excluded | Eliminated — all tested income included |
| Section 250 deduction (corps / Section 962) | 50% | 40% |
| Effective rate (corp or Section 962 election) | ~10.5% | ~12.6% |
| Foreign Tax Credit — creditable portion | 80% | 90% |
| Break-even foreign tax rate | ~13.1% | ~14% |
| High-tax exclusion threshold | 18.9% (90% of 21%) | ~14% |
| Reporting form | Form 8992 | Form 8992 (updated) |
The NCTI base is broader: removing the QBAI deduction means CFC profits backed by substantial tangible assets abroad are fully included, not partially sheltered.
2025 GILTI mechanics (your current filing year)
When GILTI applies, your pro-rata share of the CFC’s tested income above a 10% return on tangible assets flows to your personal return via Form 8992 and Schedule 1.
Problems GILTI creates for individual owners:
- GILTI is taxed at ordinary income rates for individuals (no 50% deduction without a Section 962 election)
- No Foreign Tax Credit is automatically available at the individual level without a Section 962 election
- Cash trapped in the CFC is still taxed currently, creating a dry-tax liability
Strategies that apply to both years
- Section 962 election: to be taxed as if a domestic C-corp (accesses Section 250 deduction and FTC, but creates layered tax on later dividends). Deduction is 50% for 2025, 40% for 2026+.
- High-tax exclusion: if the CFC’s effective foreign rate exceeds 18.9% for your 2025 return, or approximately 14% for 2026+, income can be excluded
- Restructuring to a disregarded entity (Form 8858) where practical
For a detailed breakdown of how GILTI and NCTI compare, see our GILTI and NCTI guide.
Last updated on April 29, 2026
